When you make or accept an offer on a home, it’s easy to assume the deal is near complete once the offer is accepted. However, many variables can cause the house to fall out of contract, and for the deal to fall through before making it to the closing table. To help avoid this situation, it’s helpful to be knowledgeable about potential issues that may cause a house to fall out of contract. Read on for some of the top reasons a house falls out of contract.
The inspection uncovers significant issues
Once the offer is accepted, the buyer typically hires an inspector to conduct an inspection. The seller will fix most issues before the closing, or the seller will give the buyer the money to make the repairs independently. It’s the inspector’s job to identify all the issues. Then the buyer must decide what issues they feel are necessary enough to pursue fixing. However, sometimes the problems can be too substantial that the buyer walks away from the deal. Or, if the seller won’t make or pay for the repairs, this can also cause the house to fall out of contract.
The house doesn’t appraise
A mortgage lender will require a home appraisal before the loan is secured. However, if the home’s appraisal is lower than the purchase price, the seller will either need to lower the sale price or, if the buyer still wants the house, will need to pay the difference in cash. However, if either party won’t compromise, the seller or buyer may walk away from the contract.
The mortgage falls through
The real estate transaction isn’t complete until the closing documents are signed. Even after the inspection and appraisal are completed, the financing needs to go through before both parties can sign the closing documents. Income discrepancies, failure to pay taxes, tax fraud, job loss, significant credit score changes, and other financial differences can cause the mortgage lender to rescind financing. This also means the buyer will lose the escrow money.
The buyer’s house won’t sell
Some buyers are unable to buy a house without selling their home first. If the buyer outlines in the contract that their ability to purchase is contingent on the sale of their house and that house doesn’t sell, the buyers may need to walk away from the transaction.
The buyer or seller changes their mind
If either the buyer or seller gets cold feet or has a change of heart at the last minute, the house might fall out of contract. This is also considered a breach of contract. If the buyer backs out, they will lose the escrow money. If either party backs out, the other can sue for damages.
